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The crazy true story of how George W. Bush secretly tried to raise the gas tax

The crazy true story of how George W. Bush secretly tried to raise the gas tax

By on Jul 5, 2016Share

Remember that time the George W. Bush administration tried to sneak a new gas tax onto the books and sort of succeeded?

You probably don’t, because not even those fighting over this measure in Congress understood what was going on. As far as I can tell, the only person who knows the full story is Hanna Breetz, a political scientist at Arizona State University who wrote a dissertation on U.S. alternative fuel policy back in 2012. It’s a dissertation that — mirabile dictu — broke news. But, because it’s a dissertation, no one noticed.

Breetz’s research provides a rare glimpse inside the political sausage factory that churns policy proposals into laws for the good old US of A. In this episode, nobody saw the full picture, and nobody was pushing for the thing that emerged in the end. It’s a story that shows how sometimes there is no guiding plan behind this country’s policy. The politicians weren’t rational planners — they were more like ants tugging a leaf in haphazard directions until they reached a destination.

Back in January 2006, Bush held a one-man intervention with the United States, telling the country that it was “addicted to oil.” To help wean us off our addiction, he called for us to increase our alternative fuel consumption to 35 billion gallons by 2017. Where did this number come from? Conventional wisdom held that Bush pulled it from thin air.

“Tellingly, not one of the industry lobbyists, environmental advocates, Department of Energy analysts, or Congressional staff that I interviewed seemed to know where the 35 billion gallon goal came from,” Breetz writes. “Many of them derided it as a number made up for political purposes.” The people she interviewed described the target as “arbitrary,” “mythical,” and “mind-boggling.”

It’s tempting to believe that some young speechwriter suggested this number after Bush initially wrote “62 squigilliam gallons!”

In fact, the number had a purpose, and it wasn’t plucked from a hat. But the Bush administration seems to have kept silent about its rationale so that no one would figure out what it was actually proposing: doubling the federal gas tax.

Before the speech, Bush had asked his advisors for a proposal that could make dramatic change without dramatic government intrusion. Bush wanted to work with the market, not pick winners and losers. His advisors suggested a gas tax. Make gas a lot more expensive and people will start choosing other fuels. Of course, this would never fly because most members of Bush’s political party had sworn not to raise taxes of any kind. I imagine someone in the Council of Economic Advisors standing up to say, “Clearly, the best solution would be to tax oil but … we’re Republicans.”

Then, one of these advisors, Benjamin Ho, “reached into the economics literature for an almost subversively clever alternative,” Breetz writes. That alternative: Tell oil companies that they must use an unrealistically high quantity of alternative fuels or pay a penalty — in this case $1 per gallon. It’s functionally equivalent to a gas tax, but it doesn’t look like one. If that doesn’t make sense, you can read how it works here, but remember this is incomprehensible by design. The Bush administration didn’t expect the alternative fuels to emerge out of thin air — it chose a number so big that it would force companies to pay a penalty and push gas prices up. Setting a mandate for 35 billion gallons of alternative fuels would add about 20 cents to the price of gas, on top of the existing 18.6 cent federal gas tax.

When the Senate took up this proposal, however, it morphed into something different. Instead of allowing the market to choose the alternative fuels, senators picked the winner: biofuel — ethanol and biodiesel grown in the Midwest. Instead of creating a mandate for a wide variety of alternative fuels, senators expanded a mandate exclusively for biofuels — gas from plant juice — they had passed two years before. Environmentalists, concerned about the amount of land that we’d need to grow all these biofuels, successfully lobbied to get a mandate for cellulosic ethanol — which can, in theory, be produced without any additional land — into the law.

Along the way, lawmakers eliminated the $1-per-gallon penalty, the key feature required to make this policy an incognito gas tax. They replaced it with fines for companies that failed to meet the impossibly high oil displacement goals. These fines have driven up the price of gas, Breetz told me, but the entire process is inefficient and punitive. In the past, the companies have paid fines for failing to buy cellulosic ethanol that didn’t exist. The courts struck down that practice in 2013, but the EPA still requires oil companies to buy biofuels or pay a fee. Now the fees and volumes are much lower than Bush advisors envisioned, and probably too low to significantly budge the price of gas.

The bill President Bush signed into law on Dec. 19, 2007, Breetz writes, bore little resemblance to what most analysts thought was achievable, or what anyone had wanted to begin with (including the industry it purportedly helped).

The Bush administration deserves more credit than greens generally give it for passing an incognito gas tax. Of course, it didn’t exactly work, but it’s still interesting to see how factions with shared interests pulled this proposal in opposite directions. This case study challenges the notion that democratic governments make deliberate, rational choices. Perhaps we should think of public policy as emergent phenomena, like the formation of geometric patterns in snowflakes and the movement of schools of fish. Maybe democracies plan their political fate only to the same degree that termites plan the architecture of their mounds. For this termite, spending his days scribbling away about what ought to be done, that idea is at once terrifying and liberating.

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The crazy true story of how George W. Bush secretly tried to raise the gas tax

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Next Generation Fuel on the Rise

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Next Generation Fuel on the Rise

Posted 9 September 2014 in

National

Big things are happening in Iowa. For the second week in a row, a new cellulosic ethanol facility is coming online — one of four new cellulosic ethanol facilities opening in the U.S. before the end of the year.

Located in Galva, Iowa, Quad County Corn Processors’ Adding Cellulosic Ethanol (ACE) project is turning corn kernel fiber into low-emission renewable fuel. This first-of-its-kind facility is the result of a $9 million investment and is expected to produce 3.75 million gallons per year of cellulosic ethanol from a feedstock already onsite.

Cellulosic ethanol is a low-emission, sustainable biofuel produced from agricultural waste. Blending that ethanol into our fuel will help to reduce our dependence on foreign oil — and make our air cleaner.

Learn about the ACE project and the other new cellulosic ethanol plants in our infographic above.

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Next Generation Fuel on the Rise

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Our Response to the Feinstein-Coburn Bill to Eliminate Corn Ethanol Mandate within the RFS

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Our Response to the Feinstein-Coburn Bill to Eliminate Corn Ethanol Mandate within the RFS

Posted 13 December 2013 in

National

The bill from Senators Feinstein, Coburn, and their co-sponsors is short-sighted and demonstrates a failure to understand how the renewable fuel industry works.

First and second generation renewable fuel are linked and in weakening the corn ethanol industry, this bill will kill the promise of cellulosic fuels – the very sector the Senators claim to support.

First-generation producers are investing in the next generation of clean fuels. Damaging those companies would result in a huge reduction in investments aimed at cellulosic commercialization.

It would also signal to investors that the RFS did not create the stable marketplace that it was intended to, and that Congress could change any part of the law based on the political mood of the day. Together, these consequences would fatally damage the future of advanced fuels in America.

Economists agree that oil is the main driver of high food prices, not corn. And the widespread belief that 44 percent of the corn crop goes toward ethanol is untrue. Roughly a third of that corn is made into high-protein animal feed. This bill is based on rumors perpetuated by the oil industry, not facts.

This measure would strand billions of dollars already invested in advanced fuels; undermine research and development; and threaten thousands of potential jobs.

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Our Response to the Feinstein-Coburn Bill to Eliminate Corn Ethanol Mandate within the RFS

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Bloomberg News: Ethanol’s Discount to Gasoline Expands on Outlook for Ample Corn

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Bloomberg News: Ethanol’s Discount to Gasoline Expands on Outlook for Ample Corn

Posted 22 August 2013 in

National

From Bloomberg News:

Ethanol’s discount to gasoline expanded the first time in a week on speculation that next month’s corn harvest will yield ample supply of the biofuel feedstock and reduce costs for producers.

The spread, or price difference, widened 2.75 cents to 71.18 cents a gallon at 12:03 p.m. New York time, as participants in the annual Professional Farmers of America Midwest crop tour estimated higher yields in corn-producing states such as South Dakota and Ohio after inspecting fields. One bushel of corn makes at least 2.75 gallons of ethanol.

“Medium to long-term, it looks like there will be plenty of corn,” said Justin Dirico, manager of the biofuels desk at Eagle Energy Brokers LLC in New York.

With yet more reports of ethanol’s discount compared to gasoline, it is clear that the RFS helps ensure lower costs to consumers as well as the ability to both feed and fuel across the country.

 

 

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Bloomberg News: Ethanol’s Discount to Gasoline Expands on Outlook for Ample Corn

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Are Fungus-Farming Ants the Key to Better Biofuel?

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Secrets from their underground fungus fields could help fight climate change. DavidDennisPhotos.com/Flickr “If you have ants in your house,” the great Harvard ecologist EO Wilson once said, “be kind to them.” Keep this in mind the next time you want to flick one off the kitchen table: The tiny critters, which collectively weigh about as much as all of humanity, could wield a big weapon in the fight against climate change. In the US, corn-based ethanol is a big business, consuming 40 percent of the domestic corn crop and providing roughly 10 percent of the fuel supply, which would otherwise be dirty fossil fuels. But the practice of topping your tank off with corn is fraught with problems: Some argue that the crop should be used for food; it’s sensitive to drought; and the ethanol-making process might be contributing to an E coli epidemic, to name a few. That’s why the Obama administration recently announced a plan to invest $2 billion in organic fuels that rely on things other than corn, including switchgrass and gas from cattle poo. But this weekend, a group of scientists discovered a chemical key that could revitalize corn-based ethanol by allowing it to be made from stalks, leaves, and other bits beside the cob itself. This won’t help much with the drought problem (less corn is still less corn), but it could alleviate the food-vs-fuel debate and the E coli problem as more kernels are saved to go straight to livestock. Turns out, the savior of ethanol could be the South American leafcutter ant. Leafcutter ants make some of the largest underground colonies in the world, some with as many as seven million residents. And, as the name suggests, many of them spend their days combing the rainforest for bits of leaves, gathering half the weight of a cow per colony every year. They carry this mass back into their tunnels and use as fertilizer for a crop of fungus, which they then eat. Ant experts (“myrmecologists,” if you care to know) have long believed that the fungus acts as a kind of external stomach for the ants, breaking down sugars in the leaves that the ants aren’t equipped to handle themselves. In fact, it’s not the fungus itself that breaks down the leaves, but chemical enzymes within it, and Frank Aylward, a microbiologist at the University of Wisconsin-Madison, says those same enzymes could be used to help break down corn byproducts to make fuel. In a new study, Aylward sequenced the genome of the leafcutter ant’s symbiotic fungus, and identified for the first time the exact enzymes that have evolved over millennia to efficiently break down plant material stored in the ant’s underground tunnels. For making fuel, Aylward asks, “why don’t we use the rest of the corn plant? It’s because the sugars are tied up in cellulose and other things that are hard to break down. So we’re looking for enzymes that can help.” Enzymes are already used for this purpose, and a crop of businesses have sprung up in the biofuel boom to manufacture them, but Aylward believes his could be among the most efficient ever discovered. And using every part of the corn plant, including parts that typically go to waste, could make ethanol production more sustainable and boost its climate benefits. To study the ants, Aylward and his team traveled to Panama and Costa Rica to collect specimens (“The trick is to get the queen,” he says), then brought them to a lab in Wisconsin where they could take samples of the fungus as the ants cultivated it. While there are many microbes that can break down tough plant matter, he says, the ants do it exceptionally well: Collectively, they’re the largest herbivore on the continent. “We wanted to see if there was something that allowed them to do that so efficiently,” he said. Aylward’s findings pinpoint that secret ingredient enzyme, and he says he’s already been contacted by private businesses looking to manufacture the enzymes and get an early start on applying them to biofuel production; they could even be mixed and matched with other enzymes to take the ants work even further. “The ants are really successful at this,” he said, “and that’s the exact thing we want to do with plant biomass.”

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Are Fungus-Farming Ants the Key to Better Biofuel?

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Are Fungus-Farming Ants the Key to Better Biofuel?

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Study finds no direct correlation between the Renewable Fuel Standard and rising food prices

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Study finds no direct correlation between the Renewable Fuel Standard and rising food prices

Posted 12 June 2013 in

National

Opponents of renewable fuel have tried to claim over and over again that the Renewable Fuel Standard is to blame for rising food prices. But a new study from ABF Economics pours cold water on this false premise. Here’s what you need to know about the RFS and food prices:

  1. The Renewable Fuel Standard (RFS) isn’t directly correlated to food prices.
  2. According to a recent study from the World Bank, rising food prices are actually driven by energy costs, specifically oil. As they put it, “Of all the drivers of food prices, crude oil prices mattered the most.”
  3. Not only has the RFS not been directly correlated to food prices, the Consumer Price Index shows that retail food prices have gone up more slowly since the RFS kicked in five years ago (See Table 1 on page 4 of the report).
  4. The RFS is also helping to lower feed cost for farmers and ranchers, as they work to feed America. Ethanol production results in a byproduct (known as “dried distillers grain” or DDGS) that is used as highly-nutritious animal feed. Higher-quality feed means livestock and poultry producers can use less of it, and DDGS have increased the availability of animal feed by 21 percent compared to the use of corn alone.

Read more from the Renewable Fuels Association on the ABF Economics study.

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Study finds no direct correlation between the Renewable Fuel Standard and rising food prices

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State by State, US Ethanol Industry Creating Jobs & Economic Opportunities

State by State, US Ethanol Industry Creating Jobs & Economic Opportunities

Posted 21 February 2013 in

National

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Crying Fowl on the Chicken Council

Crying Fowl on the Chicken Council

Posted 24 January 2013 in

National

Big Food is running in circles to rehash old – and incorrect – claims about renewable fuel.

This time, it’s the National Chicken Council trying to scare football fans about the supply of chicken wings, and it’s déjà vu all over again: the industry repeatedly ignores the true drivers of food costs.

Despite the Chicken Council’s claims, the poultry industry hardly seems to be cutting back on feed and animal production.

According to market analysts, USDA estimates show more corn going to livestock and poultry feed, implying “that livestock and poultry producers used up more corn than earlier expected.” And, the same analysts noted, producers “do not seem to be cutting back but rather are increasing animal numbers” and animal weights.

Perhaps one reason is that far less of the corn crop is used in creating renewable fuel than the Chicken Council claims. Ethanol is produced from a different type of corn than the crop that people eat. This field corn, fed to livestock, delivers two beneficial products – the ethanol itself from the starch portion of the kernel – and the remaining part of the plant, with nutritious fiber, protein and more, is turned into valuable livestock feed.

(That feed, a beneficial co-product of creating renewable fuel, is increasingly being used by the poultry industry itself, because it packs more energy and protein than other feed sources.) When you look at both products, only 17% of the net corn crop goes to ethanol.

And it’s important to remember, the majority of food costs, nearly 84%, come from non-farm costs like marketing and energy costs. In fact oil prices ultimately drive food prices.

Whether you are rooting for the Ravens or the 49ers, Americans can enjoy their favorite food and the benefits of renewable fuel. The chicken lobby, meanwhile, should keep its eye on the ball and leave fans to enjoy the game.

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Crying Fowl on the Chicken Council

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Chicken Little

Chicken Little

Posted 10 January 2013 in

National

The poultry industry is once again trotting out untruths when it comes to food prices, so it’s time to take a closer look at the author behind their latest collection of “facts.”

In a recent study, Dr. Thomas Elam is repeating the same tired arguments about food prices we’ve all heard before. This is unsurprising, given that his methodologies have been questioned in the past. EPA took him to task back in 2008 saying that his modeling around impact of the renewable fuel standard did “not appear to accurately reflect market forces” and that EPA did not find the analysis “plausible.”

Even more telling is the company Elam keeps: his colleagues at the Center for Global Food Issues claim to conduct research on environmental issues and food production. But that’s hard to swallow when they avidly deny climate change (for instance, claiming that tropical rainbelts shift every few hundred years). Climate change is arguably the biggest threat to food production, affecting global temperatures, drought and water supplies.

Oil is one of the biggest global warming culprits. With 2012 topping the charts as the warmest year ever for the U.S., it’s time to get real about the connection between oil, climate change, and food costs.

Let’s take a look at the facts:

Fact: Oil prices drive food prices – and global food prices are dropping

Energy costs – along with labor, marketing and packaging – are the main driver of food prices, plain-and-simple.

The vast majority — 84% — of food costs are derived from non-farm costs, according to the USDA and the Economic Research Service. (And it’s not just ERS: the United Nations has raised the alarm about the impact oil prices are having on our food prices.) That means just 16% of the dollar that someone spends at the grocery store goes to pay for all of the different crops that made the food they’re buying. And out of that 16%, just 3% is for corn (Elam himself notes in the study that “corn is just one of many basic farm inputs used to produce the U.S. food supply.”)

Because of the major oil-based inputs to food prices, oil prices ultimately drive food prices, not ethanol. What’s more, when you look at food prices on a global scale, they’re actually dropping, according to the latest UN figures and information from the US EIA and BLS:

(Sources: EIA and Bureau of Labor Statistics)

When you know the facts, this line from Elam is particularly suspect: “other than major increases in corn production . . . the only other possibility for food affordability relief is to revisit the RFS, and lower ethanol production incentives.”

Reducing the cost of oil – both as a food cost input and as a driver of household costs for Americans – would be a great place to start to make food more affordable.

Between 2009 and 2011, average household spending on gasoline jumped nearly 44% according to a Bureau of Labor Statistics data, while spending on food at home was nearly flat, up just 1.0%.

Which brings us to our next fact . . .

Fact: Ethanol saves families money

Renewable fuel helps to lower the price of fuel, the key driver in food prices. An Iowa State University study found that in recent years, ethanol has cut gasoline prices by $0.89 per gallon from where they otherwise would have been. Overall, Americans saved $50 billion on imported fuel costs in 2011 thanks to renewable fuel. Renewable fuel has also driven a $500 billion increase in America’s farm assets since 2007, supporting our nation’s farmers and struggling rural economies.

Fact: Ethanol does not use nearly as much of the corn crop as people think

The “40% myth” is just that – it’s a myth, and it’s wrong.

Ethanol is produced from a different type of corn than the crop that people eat. This field corn, fed to livestock, delivers two beneficial products – the ethanol itself from the starch portion of the kernel – and the remaining part of the plant, with nutritious fiber, protein and more, is turned into valuable livestock feed.

When you look at both products, only 16% of the net corn crop goes to ethanol.

Worldwide, the vast majority – more than 90% – of the corn crop is available for non-ethanol use.

Elam not only ignores the reality of how global food prices have changed over time, but the central role that oil plays in those prices. Prices at the pump are what’s really eating into American’s paychecks, not ethanol.

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Chicken Little

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